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Hiring a relief vet?
Several factors determine whether they're subcontractors or employees.
In an economic climate where the consumer's disposable income is flat or declining, many health professionals are looking for ways to control their largest single expense: payroll.
Consequently, many veterinary practices are hiring outside veterinary professional help, rather than take on full-time associate doctors.
These outside practitioners, who for lack of a better term I will refer to as "relief" vets, often work at clinics outside the traditional employer-employee relationship. There can be advantages for both the practice and the practitioner in many instances.
Relief veterinarians benefit by being able to work at times of their choosing. It's a convenient way to fulfill family commitments and still remain current and involved with the profession.
For practice owners, relief veterinarians can offer more than just relief from what seems an endless parade of stressful workdays. They can provide a bridge during periods of temporary short staffing (vacations, maternity leaves, etc.), and can make it possible for a clinic to get professional help without the financial commitment of adding another 40-hour-per-week veterinarian. Relief doctors generally do not receive many of the bene-fits of full-time employment, and the practice does not have to worry about keeping a full-time doctor busy during slow periods.
But there are a number of legal (particularly tax and insurance) issues which should be carefully evaluated prior to entering into a client relationship with a relief vet. That goes both for the doctor and the clinic. As many practice owners know and many newly-minted relief veterinarians discover to their dismay, business mistakes can be quite costly. But DVM Newsmagazine readers don't have to worry: They just need to consider these easy-to-follow guidelines:
Ignorance of the law no excuse
Labor law and tax law violations are not "intent" crimes. You don't get a pass when you inadvertently underpay, underwithhold, underinsure, etc., simply because you didn't mean to or didn't understand the rules. Again, that goes both for the relief doctor and the veterinary hospital.
The best way for both to avoid falling into a legal trap is to have a pre-employment "summit," at which the details of federal, state and local law compliance are discussed. Both the hospital and the doctor providing relief services need to understand the terms of their relationship (which go far beyond dollars per hour). This need not be a contentious discussion. It is merely a chance for the parties to share a meeting of minds. Both need to be sure they are in compliance with the laws governing their business relationship. The following issues should be discussed and agreed to in writing:
Worker compensation insurance
Both sides need to understand thoroughly the concept of worker compensation coverage. My office has handled matters for independent-contractor veterinarians for decades, and this issue has emerged as the gold standard in terms of state labor-law compliance and federal tax-case interpretation.
As I have discussed in prior articles, worker compensation insurance is a legal compromise developed by states to serve two purposes — making sure there is money to compensate employees injured on the job and insulating employers from huge negligence lawsuits.
Please note that I said that the law compensates employees. It does not — and never was intended to — cover non-employees. Thus the $64,000 question: Who is an employee and who is not?
Veterinary clinics used to think they could avoid paying costly worker compensation insurance premiums on part-time vets simply by using an IRS 1099 form. For example, the relief doctor would work 20 hours at an agreed rate of $50 per hour, and the clinic would simply pay him or her $1,000, making no withholding. They would follow that up by mailing the doctor a 1099 the following January. The form would have "non-employee income" checked off and that would be that. No employer Social Security contribution, no unemployment insurance, no Medicare withholding, no worries.
That 1099 theory worked for a little while back in the 1970s when computer-based compliance systems were in their infancy. Remember when nobody had to tell IRS when a stock was bought or sold? Those days are gone. Now capital gains are scrupulously tracked to the penny by Uncle Sam. And the same degree of attention is focused on the intricacies of the employee-employer relationship.
The upshot of the effort to ensure employer compliance is that, in each case, there must be a determination of who is and who is not an employee.
For years, the IRS employed numerous ad hoc tests to determine whether the person receiving compensation for work or the person providing compensation was responsible for making sure that Medicare, FICA, unemployment insurance and other withholding were being satisfied. They looked as such things as who determines the hours, who supervises the worker, whose tools (instruments) were being used and so on.
Lately, though, it seems that the determination of who is the employer (the clinic or the relief vet) focuses closely on a single issue: Who provides the worker compensation coverage? If the relief vet carries his or her own policy, he or she is much more likely to meet the independent-contractor test and thus be responsible for his or her own tax and insurance compliance.
But if the clinic arranges for and pays the worker compensation premium, it is in a much weaker position to claim later that it was not an employer and thereby exempt from all the other withholding and compliance issues.
Neither party can unilaterally avoid sanctions
Here is why the relief vet and the clinic owner need to chat about legal compliance before the work begins:
1. SOMEBODY HAS TO BUY THE COMP COVERAGE.
If you hire a company to fix the furnace and the technician gets hurt, your office probably doesn't have a problem. The worker likely will be considered a non-employee, and someone other than you will be responsible for his medical bills.
The same cannot be said for a relief vet who works several days at your business. You have an obligation to make sure that person is insured, either by covering the doctor or demanding a current certificate of worker compensation coverage.
In many states, a clinic's comp carrier automatically assesses the clinic account for premiums covering a relief veterinarian if he or she does not provide proof of coverage.
So be sure to get that certificate during your early summit. This will avoid inadvertent payment of premiums by both parties or, worse, a complete failure of coverage followed by lawsuits and uncovered medical bills.
2. IF YOU PAY THE COMP, YOU MAY HAVE TO WITHHOLD, TOO.
Many relief vets have no idea about insurance but insist they are independent contractors and therefore want gross pay with no tax withheld. The intent is that the relief vet will handle his or her own tax compliance.
The problem is, while the spirit may be willing, sometimes the pocketbook is weak.
If the relief vet runs short of Christmas money, he or she may not pay the estimated tax, FICA and Medicare amounts due, or not on time.
Guess who the IRS will be looking to for money and explanations (read: penalties)? They probably will talk to Dr. Relief for about 5 minutes, and then they will come to you. It would be really nice to have a document to show them, signed by the relief vet, accepting all liability for those payments.
3. EVEN IF DR. RELIEF CARRIES INSURANCE, SHE STILL MIGHT BE YOUR EMPLOYEE.
In your initial discussion of tax and insurance details with a potential relief vet, (which may be the first time he or she has ever even heard of these issues), you need to find out a few things.
The government's eventual determination that the relief vet was an independent contractor (presumably freeing the practice from withholding and other obligations) may hinge on some other facts and circumstances, such as these:
» Does the relief vet operate within a business entity such as an LLC?
» Does the relief vet advertise?
» Does the relief vet have some clients who do withholding for him and others who do not?
» Does the relief vet submit invoices to her client hospitals?
» Does the relief vet have at least a rudimentary contract for client hospitals to sign?
While no single one of these tests is definitive, let's just say that the more "incidents of independency" that the relief veterinarian can demonstrate, the more unlikely that the practice later will have to explain a failure to comply with traditional legal obligations of an employer.
Dr. Allen is president of the Associates in Veterinary Law P.C., which provides legal and consulting services to veterinarians. Call (607) 754-1510 or visit email@example.com.